2018 US Dollar Forecast

The 2018 US dollar forecast can be different for various banks and in terms of timeframe. This article looks at the average trend for US dollar forecasts this year and how it might impact your home currency.

US Dollar Under Pressure

The US dollar (USD) appears to be settling down, after hitting over 3-year lows. While most bank forecasts show the USD will recover, the movements and speeds differ widely. This is because there are a lot of influences on the US dollar.

So what are the key US dollar influences?

US Economy

When the US economy gets stronger the US dollar improves. Right now the US economy is growing, which means consumer spending, employment rates and house prices are all improving.

Politics

US politics is currently having a very big influence on the US dollar. Many believe President Donald Trump will be unable to deliver on his pre-election tax promises. Greater uncertainty from politics means investors will sell the US dollar, because there is a greater chance of it getting weaker. When political issues get resolved and there is more certainty, the US dollar improves.

Imports and Exports

The US is world’s largest importer and is the world’s second largest exporter (second to China). When imports are greater than exports the US dollar rises, because it signals a more prosperous economy.

More importantly, how does the US dollar affect me?

The US economy is the biggest economy in the world. This is why events in the US significantly influences all other currencies.

Usually, when the USD goes up, your home currency gets weaker. When the USD falls, your home currency gets stronger. However, this isn’t always the case.

If you want to see what will happen to your home currency for the rest of the year check out our 2018 forecast currency posts. Here is a snapshot:

Australian Dollar (AUDUSD)

After hitting 81 cents in late January, the Aussie dollar (AUDUSD) has declined. Last month, the AUD fell to a low of 76.790 cents, but is steady above 77 cents now. Major banks are divided on what the final Australian dollar rate will be by the end of the year. However, most are predicting a decline in the Aussie dollar exchange rate.

Euro Dollar (EURUSD)

The strength in the EUR USD exchange rate since the beginning of 2018 to 1.2278 right now has surprised many of the major bank analysts, who have had to increase their near-term forecasts. For the rest of 2018, bank analysts are predicting the Euro to rise towards 1.3000 by the end of the year, but not without hiccups.

Great British Pound (GBPUSD)

The Great British Pound (or Pound Sterling) is slowly gaining since hitting 31-year lows in October 2016, but it’s been a bumpy ride. This year, most bank analysts predict the pound sterling to remain flat – basically unchanged from current levels or a tad bit higher. Currently the GBP is just shy of 1.4100, nearly the highest level in one and a half years.

New Zealand Dollar (NZDUSD)

The New Zealand Dollar started 2018 on a positive trend after tumbling at the end of 2017. The NZD has since settled just above 72 cents. However, the NZD is at the lower end of a 72-74 cent range since the beginning of the year. And is also well below the highs of 88 cents hit 3-4 years ago. Bank analysts are generally more pessimistic over the trajectory of the NZD.

Japanese Yen (USDJPY)

The Japanese Yen (USDJPY) has been strengthening since the beginning of the year. Currently the USDJPY is at 105.00, from 112.00 in January. This is the lowest USDJPY rate in one and a half years. Major banks think the Japanese Yen will continue to rise against the US dollar in 2018. Bank forecasts have been revised for the USD JPY to fall towards 100.00.